Northern Securities faces further regulatory discipline

Vic Alboini’s investment dealer Northern Securities Inc. is once again in the cross-hairs of the industry’s self-regulatory agency.

Northern, which in December agreed to cease institutional and retail sales and “restrict its activities to mergers and acquisitions, research and corporate finance,” is now facing enforcement action by the Investment Industry Regulatory Organization of Canada for allegedly failing to maintain sufficient regulatory capital and failing to have an approved chief financial officer.

According to a discipline notice issued Thursday, Northern had risk adjusted capital “in an amount less than zero” for 38 days between Nov. 21 and Jan. 25.

IIROC further alleges that Northern “failed to have adequate internal controls” because it did not have an approved CFO during the period, expect for a couple of weeks in January.

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Northern issued a news release saying it intends to respond to IIROC’s action. The firm headed by Mr. Alboini — a prominent activist investor whose most prominent recent target was BlackBerry maker Research In Motion Ltd. — agreed to get out of aspects of its business by the end of last year when it was unable to replace its departing carrying broker.

In November, Mr. Alboini himself was ordered suspended from the investment industry for two years by IIROC in a separate matter dating back to 2008. But the IIROC sanctions in that case, including a $625,000 fine and a permanent ban as an “ultimate designated person” at an investment dealer, have been put on hold pending an appeal to be heard by the Ontario Securities Commission in February.

Following a hearing last year, and IIROC panel found that Mr. Alboini had “engaged in a trading practice which improperly obtained access to credit for his client… and in doing so risked the capital” of both Northern Securities and its carrying broker.

The IIROC panel looked beyond the 2008 trading, and concluded that between 2006 and 2010, Mr. Alboini and Northern’s chief compliance officer Frederick Earl Vance “repeatedly failed to ensure that NSI (Northern) corrected deficiencies found in three business conduct compliance reviews and one trading conduct review.”

By doing so, IIROC said, they engaged in “conduct unbecoming or detrimental to the public interest.”